.. ince buyers that it can produce quality cars in another particular market segment. By merging with another company, a company can build upon it’s know reputation. Ford says Lincoln stands for American luxury; Volvo means thoughtful and understated, Jaguar suggests refined power, and Aston Martin is a most exclusive club (Holstein). Ford is looking to these names to catapult them to the rank of the world’s dominant maker of luxury vehicles. In 1998 Ford sold 250,000 luxury vehicles worldwide and Volvo sold about 400,000. If Jaguar continues to expand and the numbers from Ford and Volvo are combined, Ford should be able to sell about 1 million luxury cars per year soon after 2000 (Holstein).
With all the merging and production it is very important for an automotive maker to avoid the mistake made by General Motors when it lost the definite identities between Chevy, Buick, and Oldsmobile. To Ford’s credit, it has maintained Jaguars original identity and kept the great reputation that follows it. Jim Mateyka, vice president of the auto practice at A. T. Kearney says, It’s next to impossible to suddenly convince people after 100 years that Ford is a luxury car (Holstein). All Ford had to do was purchase the name Jaguar and make the company better while at the same time gaining an instant reputation for luxury.
Issue II: Safety The auto industry started out designed to fit the need for transportation only. Safety was never a concern to the public due to the fact that automobiles were limited to a top speed of fifteen to twenty miles per hour. Auto manufactures were more concerned with cheaper production than safety. As speed increased and time moved on, safety concerns started to rise. These concerns led to the improvement of many safety features from seatbelts to the new smart airbags.
Recent General Motors studies show that consumers rate safety as the number two item they look for when purchasing a new vehicle. The first item consumers look for is price. Safety is now something people want and expect in an automobile according to Dee Allsop, a pollster and senior vice president of Wirthlin Worldwide, which assesses marketing issues for consortium of auto makers (ElBoghdady). The one safety feature expected in today’s automobiles is a state of the art airbag system. Airbags have become one of the most heated issues in the automotive industry.
As airbags continue to reduce fatalities and prevent injuries, the consumer demand for airbags rises. Estimated airbag life saving benefits calculated as of October 1, 1999 were that 4,011 drivers were saved and airbags while 747 passengers were saved (from NHSTA). As a result, car driver fatalities was reduced by 31 percent and car passenger fatalities reduced by 32 percent. Light truck driver fatalities was also reduced by 36 percent (from NHSTA). More people are becoming concerned over their children’s safety and are looking for and demanding safety features.
This is making the safety technology departments race to make their company’s vehicles safer quicker (ElBoghdady). The airbag demand has Ford installing as standard equipment side-curtain airbags installed in addition to the driver and passenger side airbag on the Focus and the 2002 Explorer. The passenger airbags on the 2000 Ford Taurus has sensors that adjust for a person’s height and sitting position. They will deactivate the front and side airbags in a low speed collision to avoid passenger injury. Even though airbags can save lives, they have been know to tragically take a lives, especially those of children.
Safety is the top concern for baby boomers with children due to seatbelt and anti-drunken driving campaigns since grade school (ElBoghdady). These tragic events have the consumers asking about extra safety features such as devices that deactivate the passenger side airbags for infants and children. Mercedes is now equipping some vehicles with a baby smart system to deactivate passenger-seat airbag if there is a special child carrier buckled up front (Consumer Reports). Consumers may purchase a special car seat from a Mercedes dealer, which is equipped with a sensor that triggers the baby smart system once installed in the front passenger seat. The future of American safety technology may lie in the hands of General Motors.
GM is expecting to match the European competition of Mercedes’ Tele Aid system by installing its own on-board global satellite positioning and hands-free cell phone service into their 24-hour OnStar system. When an airbag is deployed, a sensor uses the global satellite positioning to send a signal to the OnStar center to dispatch emergency personal immediately to the site of the vehicle. Ford is expected to start installing a similar system in the year 2001. The future looks bright when Terry Connolly, director of GM’s North American Safety Center says; There are opportunities in crash avoidance that are at some point going to become fairly dramatic. At some point in the future a crash will be a rare event (ElBoghdady). Conclusion/Summary Merging is a highly effective means of automobile manufactures to become cost efficient.
Savings may come from sharing engines, platforms, and production facilities. However, cost efficiency may not be the main goal for merging. Many times companies wish to enter another market segment when the opportunity looks promising. For example, a company may wish to enter into the luxury market, but may not want to spend the money to design and start up production of a new line. Starting a new line may come with disastrous consequences if the new model does not fair well.
Consumers may not wish to purchase the automobile if the manufacturer is not well known for luxury. The purchase of an automobile maker with a well-known luxury reputation gains instant access into the luxury market segment with instant name recognition and little risks. Safety is a very hot topic as consumers are demanding safety options when purchasing a new automobile. Airbags are quickly becoming the biggest feature to lead the way in safety competition. With a high demand for airbags, there is also a high demand from parents to have a way to disengage the system to protect their children and infants.
With airbags saving thousands of lives and reducing fatality rates as high as 36 percent, it is no wonder that consumers are so interested in demanding such a safety feature. Business.